Every individual has a dream of owning a car but not many can afford one easily. Car loans help individuals realise their car dreams. Not only do they help in owning a car but also allow sufficient time to repay the borrowed amount through affordable instalments. However, there are a few pre-conditions, which have to be fulfilled before sourcing a car loan.
In , the primary eligibility criteria for availing a car loan include a minimum age of 21 years, a minimum monthly salary requirement and reasonable credit history. A good credit history comes from a having good credit score, which can very well be the deciding factor as far as acceptance or rejection of a car loan application is concerned. So, what is considered a minimum CIBILâ„¢ score for car loans in ? Read on to find out more about this.
What is a good CIBILâ„¢ score for a car loan?
Very often, individuals are surprised to find that their car loans are rejected due to a poor credit score. Also, not many are aware of the need for credit score for car loans. In this article, we explain what is a good credit score to buy a car and also share tips on how to improve your credit score to qualify for a car loan easily.
Credit scores are assigned by various credit authorities like CIBILâ„¢. It is one of the four authorized credit bureaus in which provide a credit score, the others being Equifax, Experian and CRIF High Mark. CIBILâ„¢ Score ranges from 300 to 900 and the higher your score, the better your chances of getting a loan.
First, things first – While, there is no defined minimum credit score for a car loan, it’s always good to have a high credit score. In general, it is advisable to have a score of 750 or above to stand a good chance of being approved for a loan and to secure the best interest rates on it.
Additional Reading: What Is The Credit Score Required To Buy A Car In 2024?
Can I get a loan without a CIBILâ„¢ score?
Yes, if you have a poor credit score, it is still possible to avail of a car loan as the banks hold the car as security collateral until you repay the full loan amount with interest. While you can get a loan without a CIBILâ„¢ score note that it can be a lengthy process and far more difficult to get loan approval. Moreover, you might only be offered unattractive terms and conditions on your loan. Some of them may include a higher interest rate or a shorter repayment period.
With a good CIBILâ„¢ Score for a car loan, you can get a lower interest rate, longer repayment period, larger loan amount and simpler documentation.
How do I avoid a poor CIBILâ„¢ score?
Here are some of the reasons why your CIBILâ„¢ score is poor and also suggested ways to improve the same:
- Delayed and Missed Payments: If you are regularly delaying your repayments towards either credit cards or loans, it harms your CIBILâ„¢ Score. Ensure to set reminders for making timely payments on all borrowings. This will help in securing a good credit score for car loans in the future and better terms on the loan.
- Overutilizing credit limit: Using up the entire credit limit that is provided to you is a sign that you are not able to control your spending. Try to ensure that you do not use more than 30% to 50% of your total credit limit. This will keep your credit utilisation to a minimum and have a positive impact on your credit score.
- Rejected loan applications: If your loan applications have been rejected, do not apply for a fresh loan immediately. There will be a higher chance of a second loan rejection in such cases. Each loan rejection results in a drop in your credit score. Focus on improving your credit score first and become loan-eligible. Once this is done, you can apply for a fresh car loan at better rates.
While there is no set minimum CIBILâ„¢ score for car loans it is recommended that you have a score of at least 750 before you apply. This will help in avoiding potential loan rejections and to secure the best deals on car loans.
How to check your credit score?
You can also check your CIBILâ„¢ score through CIBILâ„¢ Credit Information Reports. This can be helpful before applying for a car loan. It is currently a paid service and the charges for the same are Rs. 470 for obtaining the report. The steps to be followed are:
- Apply for a credit score on the CIBILâ„¢ official website.
- Enter information like name, identity proof details and date of birth.
- Enter appropriate contact information.
- Make the payment to complete the process.
- After the application process is complete, the agency will get in touch with you and inform you of your updated credit score.
How can you get a good credit score for a car loan?
A good credit score requires consistency in good credit behaviour. Some activities can help in keeping the credit scores in good health. Here, we have listed them for your reference:
- The easiest thing to do while ensuring a good credit score is to make all credit payments on time.
- Try to keep loans to a minimum since multiple lines of credit can increase your credit utilisation rate, which in turn drops your credit score and increases the chances of loan rejections.
- Make sure you check your credit report often as there might be errors and unless you highlight them, they will not be remediated.
- Always pay your credit card bills in full. Paying just the minimum amount will not abstain you from the rest of the payment and it can pile up in no time.
Can I get a car loan without a CIBILâ„¢ score?
When you apply for a car loan with a good CIBILâ„¢ score, you can enjoy many associated perks like attractive interest rates, longer loan tenure, etc. As credit scores are becoming the main criteria for granting all forms of credit, it may seem impossible to get a car loan without a credit history. However, some financial institutions do consider car loan applications without a credit history but provide the loan at higher interest rates.
EndNote
Even if you meet all the eligibility criteria for a car loan, a poor CIBILâ„¢ score could be a hindrance in owning your dream car. A good credit score also means better interest rates. Therefore, it is important to take extra care of building, maintaining or remediating your credit history as needed.
Good CIBILâ„¢ Score for Car Loan in FAQs
1. What is a CIBILâ„¢ score?
A CIBILâ„¢ score is a 3-digit number presented in your credit report and reflects your credit performance over a period of time. It ranges between 300 and 900. The score acts as a measure of your creditworthiness. The higher the score, the higher the chances of getting a loan application approved easily. A good credit score is anything above 750.
2. What is a good CIBILâ„¢ score for a car loan?
Typically, a CIBILâ„¢ score of 750 and above is considered a good score for easily getting a car loan.
3. What is the minimum CIBILâ„¢ score for a car loan?
The minimum CIBILâ„¢ score to qualify for a car loan varies from lender to lender. most lenders do not have a minimum criterion. But, if you have a low credit score, then you are likely to be charged higher interest rates on the loan amount.
4. Can I get a car loan with a 600 CIBILâ„¢ score?
Yes. It is possible, to get a car loan with a low credit score. But the downside is that you are likely to be charged a higher interest rate compared to borrowers with an excellent credit score in the range of 750 and above.
5. How do I improve my credit score?
You can improve your credit score through anyone of the following ways:
- Make timely repayment of loans and credit card dues,
- Maintain a low credit utilization ratio,
- Avoid multiple loan applications at once
6. Will I get a car loan if I have a low credit score?
Yes, you can get a car loan even with a low credit score. However, you will have to showcase to the lender that you have a stable source of income. Additionally, you may also have to arrange a guarantor or opt for a lower loan amount with shorter loan tenure.
7. What if there is an error in my credit report?
In case you find an error in your credit report, you should immediately raise a dispute with the credit rating agency. If an investigation follows, you must also inform your banks and other credit providers about the same.
8. Is CIBILâ„¢ score important for a used car loan?
Lenders use your CIBILâ„¢ score to check your creditworthiness and hence it is important for both new and used car loans.
9. Will my CIBILâ„¢ score affect the interest rate of a car loan?
Yes, the CIBILâ„¢ score can affect the interest rate of a car loan. A high credit score will have a lower preferential interest rate on a car loan.
10. What is the minimum CIBILâ„¢ score for a car loan in Axis Bank?
Axis Bank has not specifically mentioned a specific credit score for qualifying for a car loan. The eligibility criteria for a new car loan from Axis Bank is:
- Age limit – 21 to 60 years
- Minimum income criteria
- Rs. 2,40,000 for salaried individuals
- Rs. 1,80,000 for self-employed individuals
While there is no minimum credit score eligibility for car loans at Axis Bank, having a high credit score of 750 and above can help you secure the best loan deals.